Written down value: compute loss after deducting only depreciation actually allowed, producing the reduced loss outcome.

Written down value for computation of loss on sale of a motor car is to be determined by deducting only depreciation actually allowed to the assessee from cost; not by deducting the full notional depreciation merely permissible under the Act. Applying that statutory definition yields a loss of Rs. 78 on the sale. The Tribunal's use of notional permissible depreciation is inconsistent with the phrase "depreciation actually allowed," and the assessing officer's computation based on allowed depreciation is operative for section 10(2)(vii) purposes.

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Issues: (i) Whether by reason of the sale of the motor-car the assessee sustained a loss for the purpose of section 10(2)(vii) of the Income-tax Act; (ii) If so, whether the loss is Rs. 78, Rs. 708 or some other sum.

Issue (i): Whether the sale resulted in a loss within the meaning of section 10(2)(vii).

Analysis: Section 10(2)(vii) computes loss as the excess of the written down value over the sale price. The statutory definition of "written down value" in section 10(5)(b) refers to actual cost less "all depreciation actually allowed". Section 10(3) restricts allowances where assets are partly used for business, but it does not alter the express definition in section 10(5)(b). The language "actually allowed" requires use of depreciation amounts that have been granted to the assessee, not the notional depreciation merely permissive under clauses (vi) and (vi-a).

Conclusion: The sale falls to be assessed for loss under section 10(2)(vii) using the written down value determined after deducting depreciation actually allowed to the assessee.

Issue (ii): Whether the loss is Rs. 78, Rs. 708 or another amount.

Analysis: Applying the statutory definition of written down value, only depreciation actually allowed to the assessee is to be deducted from cost to arrive at written down value. The Tribunal's approach of using the full notional depreciation permissible under clauses (vi) and (vi-a) is inconsistent with the phrase "depreciation actually allowed" in section 10(5)(b). The Income-tax Officer's computation, which led to a loss of Rs. 78 based on depreciation actually allowed, accords with the statutory language.

Conclusion: The loss on sale is Rs. 78 as determined by deducting depreciation actually allowed; not Rs. 708.

Final Conclusion: The questions referred are answered in favour of the assessee by holding that written down value for computing loss on sale under section 10(2)(vii) is to be determined after deducting only the depreciation actually allowed to the assessee, and on that basis the loss is Rs. 78.

Ratio Decidendi: "Written down value" for the purpose of section 10(2)(vii) means actual cost less depreciation actually allowed to the assessee under the Act; not the full notional depreciation merely allowable under clauses (vi) and (vi-a).

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